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Second Order Approximation for the Average Marginal Effect of Heckman's Two Step Procedure

Author

Listed:
  • Akay, Alpaslan

    (Department of Economics, School of Business, Economics and Law, Göteborg University)

  • Tsakas, Elias

    (Department of Economics, School of Business, Economics and Law, Göteborg University)

Abstract

In this paper we discuss the differences between the average marginal effect and the marginal effect of the average individual in sample selection models, estimated by Heckman's two step procedure. We show that the bias that emerges as a consequence of interchanging them, could be very significant, even in the limit. We suggest a computationally cheap approximation method, which corrects the bias in a large extent. We illustrate the implications of our method with an empirical application of earnings assimilation and a small Monte Carlo simulation.

Suggested Citation

  • Akay, Alpaslan & Tsakas, Elias, 2006. "Second Order Approximation for the Average Marginal Effect of Heckman's Two Step Procedure," Working Papers in Economics 239, University of Gothenburg, Department of Economics.
    • Handle: RePEc:hhs:gunwpe:0239
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    File URL: http://hdl.handle.net/2077/2667
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    References listed on IDEAS

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    1. George J. Borjas, 2021. "Assimilation, Changes in Cohort Quality, and the Earnings of Immigrants," World Scientific Book Chapters, in: Foundational Essays in Immigration Economics, chapter 2, pages 3-29, World Scientific Publishing Co. Pte. Ltd..
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    3. Atanu Saha & Oral Capps & Patrick Byrne, 1997. "Calculating marginal effects in models for zero expenditures in household budgets using a Heckman-type correction," Applied Economics, Taylor & Francis Journals, vol. 29(10), pages 1311-1316.
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    5. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 31(3), pages 129-137.
    6. Chiswick, Barry R, 1978. "The Effect of Americanization on the Earnings of Foreign-born Men," Journal of Political Economy, University of Chicago Press, vol. 86(5), pages 897-921, October.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Heckman's two step estimator; average marginal effect; marginal effect of the average individual; earnings assimilation;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • J40 - Labor and Demographic Economics - - Particular Labor Markets - - - General

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